Livestock, poultry outlooks strong despite 04 setback

Hembree Brandon Farm Press Editorial Staff | Apr 16, 2005

This year has started off with “great promise” for the livestock and poultry sectors, with strong demand for meat protein and an easing of grain costs, according to Shayle D. Shagam, livestock analyst for the USDA's World Agricultural Outlook Board.

Despite setbacks in 2004 — the loss of major beef export markets due to “mad cow” disease, trade restrictions on poultry due to Avian influenza concerns, and record domestic meat supplies — U.S. average cattle prices eclipsed the 2003 record, broiler prices hit a new record, and hog prices were the highest since 1997, he said at the Agricultural Outlook Forum 2005 at Arlington, Va.

“Positive returns for cow-calf producers and a lessening of drought in the western U.S. have led to a turnaround in the cattle cycle, which had undergone eight years of liquidation,” Shagam said. “Producers have responded to these increased returns in a measured fashion.”

Production increases in pork and poultry are expected to be “quite moderate.”

Worries still remain over the BSE issue. “Although progress has been made in addressing concerns of our trading partners, major U.S. beef export markets remain closed, and supplies of red meat and poultry for domestic consumption are expected to increase 2 percent to 3 percent. While domestic demand remains firm, these increased supplies are expected to pressure prices downward from last year's highs.

“As the U.S. continues to expand export sales, markets will likely find additional support. Continued economic growth and favorable exchange rates may also be key factors for the U.S. meat sector in 2005.”

Rebuilding phase

The cattle sector has entered its rebuilding phase after eight years of decline, Shagam said. “Conditions are favorable for expansion of the herd,” as pasture/range improve and feed prices moderate.

After averaging a record $84.75 per hundredweight in 2004, fed cattle prices for 2005 are forecast to average $80 to $85 per hundredweight.

“Prices thus far have been exceptionally strong…but are expected to decline as cattle imports resume and U.S. beef production increases. Even with access to Canadian cattle, however, U.S. packers will still be facing cattle supplies below the levels of 2002.”

Retail beef prices are forecast to be lower — in the mid to upper $3.80 per pound range, down from $4.07 in 2004 — as large supplies compete for consumer dollars.

The U.S. regained access to several export markets for beef in 2004, but remains excluded from major Asian markets. Progress has been made in developing a framework and conditions for resuming trade with Japan, but no specific opening date has been proposed and BSE slaughter rules must work their way through Japan's regulatory system.

U.S. beef exports for 2005 are projected at 640 million pounds, but because of the uncertainty about the length of bans imposed on beef imported from the U.S., the USDA's forecast assumes that bans currently in place will remain until countries announce their removal.

Beef imports are expected to rise about 2 percent, to 3.74 billion pounds.

Despite a year of favorable returns, U.S. hog producers have expanded production “only modestly,” Shagam noted. Breeding herds continue to shrink, as herd productivity gains permit more animals to be produced with fewer sows.

“If producers continue to hold the line on expansion, the U.S. pig crop in 2005 will likely increase less than 1 percent.”

In the first quarter of 2005, hog prices are expected to average $51 to $53 per hundredweight, but later in the year will likely come under pressure from growing supplies of beef and poultry. For the year, prices are expected to average $47 to $50 per hundredweight.

Pork exports are forecast to rise about 5 percent to a record 2.29 billion pounds; that comes on the heels of a 27 percent increase in 2004.

Broiler producers are expected to boost met production just over 3 percent in 2004, Shagam said. “After two years of favorable returns and last year's record prices, growth of this magnitude shows considerable restraint on the part of producers.”

Broiler prices are forecast at 71 cents to 76 cents per pound, compared to an average just over 74 cents in 2004.